Termination Clause
Synonyms: Exit Clause، Break Clause، Termination Provision
Last updated: 2026-05-06
Short Definition
Contract clause specifying conditions and mechanism for ending the contract early, like advance notice and applicable penalties.
Overview
Legal Basis
The termination clause is based on the contractual freedom principle stipulated in the Civil Transactions Law issued by Royal Decree No. (M/191) of 1444 AH. The Ejar Platform Regulation requires documentation of essential clauses including termination, and it is recognized before Rental Dispute Committees and enforcement courts.
Practical Example
An employee signed a 3-year lease for a Riyadh apartment at SAR 48,000 annual rent. He insisted on adding a termination clause stating: 'Either party may terminate the contract with 90 days notice and the lessee paying compensation of one month's rent'. After one and a half years, he was offered a job in Dubai. He sent a notice via Ejar with a specified date, and after 90 days vacated the apartment, paid SAR 4,000 compensation (one month rent), recovered his deposit, and the contract was closed. Without the clause, he would have been obligated to pay SAR 6,000 × 18 = 72,000 (the remaining 18 months of the 3-year contract).
Common Mistakes
- ✗Signing a long contract (3 years +) without a termination clause — locks the lessee into full commitment regardless of changing circumstances.
- ✗Writing a very general termination clause ('may terminate when needed') without specifying procedures and deadlines — deemed inapplicable.
- ✗Failing to specify notice method in the clause — may cause later dispute over 'did the notice arrive or not'.
- ✗Believing the termination clause cancels obligation for all remaining — actually, it usually specifies compensation rather than total cancellation.
- ✗Relying on a verbal termination clause agreed before signing — not legally recognized; must be documented in the Ejar contract.
International Differences
In the UAE, termination clauses are common and regulated by Dubai Real Estate Authority. In Turkey, unilateral termination is very difficult even with the clause, limited to material reasons. In the UK, it's called 'Break Clause' and is very common in commercial contracts. The Saudi advantage: full negotiation freedom on termination clauses with rapid electronic documentation.